A BNP Paribas SA fund has gained 35 percent this year by wagering on winners in the renewable energy industry. Now its managers plan to bet against the losers.
Ulrik Fugmann and Edward Lees will run a new long/short fund, allowing them to bet against companies that are getting left behind in the transition to greener forms of energy. They’ll start with US$50 million of assets under management, with the capacity for that to rise to US$1 billion, Lees said in a phone interview.
The BNP Paribas Environmental Absolute Return Thematic fund, which starts up on Wednesday, will “short companies that are either sitting with significant transition-risk assets or stranded assets, or indeed have technologies that are either outdated or insufficient to address climate change,” Fugmann said. “Those companies will go down over time.”
The managers’ long-only BNP Paribas Energy Transition fund is outperforming 99 percent of its peers this year, according to data compiled by Bloomberg.
The asset management arm of BNP Paribas is joining a small but growing number of funds that mimic hedge-fund tactics as a way of benefiting from the transition to cleaner energy. Trium Capital’s Joe Mares launched a long/short fund last year to make bets in high-emitting sectors like energy and transport.
Investing according to environmental, social and governance criteria has become mainstream in Europe and is growing fast in the U.S., putting pressure on managers to distinguish their funds from competitors. They’re also wary of “greenwashing,” a term referring to investments that are marketed as environmentally friendly while not delivering the promised impact.
Investors “are a little tired of looking at these ESG portfolios and seeing what’s actually in them, and then just wondering how the heck does that actually help the world out?” Lees said. – Bloomberg